The implementation of Structural Funds in the UK, 2000-2006

At the Berlin European Council on 24 and 25 March 1999, Heads of State and Government came to a political agreement on Agenda 2000.  This action programme forms the framework for the EU's policies during the 2000-2006 period.

The agreement aims to strengthen the efficiency of the Structural Funds by increasing their thematic and geographical concentration. Furthermore, the Council has estimated that by allocating a budget of 195 billion EURO to Structural Funds for the 2000-2006 period, the EU will be able to maintain its overall effort towards economic and social cohesion.  On 21 June 1999, having been agreed by the European Parliament, the European Council formally adopted the new regulations for the Structural Funds.

In order to launch the new programming process for Structural Funds, the Commission adopted a series of application decisions for the new regulations. At the financial level, the Commission set the budget ceilings for each Member State and the three priority objectives: Objective 1 (regions whose development is lagging behind), Objective 2 (regions undergoing economic and social conversion) and Objective 3 (education, training and employment). In terms of the geographical distribution of funds, the Commission established the list of areas eligible for Objective 1 funding for the 2000-2006 period, and the population ceilings for areas eligible for Objective 2 funding.

In terms of Community regional policy, the UK benefits from a budgetary allocation of 16.596 billion EURO (-10 billion) for the 2000-2006 period.  This represents a 19.5% increase on the budgetary allocation for the 1994-1999 period, which was set at 13.893 billion EURO.

1. Priority objectives

There are four Structural Funds instruments which make up the overall budget: the European Regional Development Funds (ERDF), the European Social Fund (ESF), the European Agricultural Guidance and Guarantee Fund (EAGGF), and the Financial Instrument for Fisheries Guidance (FIFG).  These are intended to address the three priority objectives:

- Objective 1:  Regions whose development is lagging behind

Objective 1 aims to promote development and structural adjustment of regions whose development is lagging behind. Regions with a GDP per capita of less than 75% of the Community average are eligible for Objective 1 funding.

For the 2000-2006 period, in the UK, South Yorkshire, West Wales and the Valleys, Cornwall and the Isles of Scilly will become eligible for Objective 1 funding.  The Merseyside region remains eligible for Objective 1 funding in the 2000-2006 period.  Apart from Finland, the UK is the only country where there has been a rise in the number of people eligible for Objective 1 funding.  As a result, 8.6% of the total UK population will become eligible for Objective 1 funding, compared with 5.9% for the 1994-1999 period.  On the other hand, the Northern Ireland and Highlands and Islands regions, which were eligible for Objective 1 funds during the 1994-1999 period, now have a GDP per capita higher than the Community average.  Therefore, as of 1 January 2000, they are no longer eligible for Objective 1 funding.   Nevertheless, these regions still benefit from transitional funding.  This aid will continue to be given until 2005, and even until 2006 in some areas.

The 2000-2006 budget for Objective 1 is 6.251 billion EURO (₤3.765 billion) compared to 2.572 billion EURO for the 1994-1999 period.  This total can be split into 3 elements:

• 4.685 billion EURO is allocated to South Yorkshire, West Wales and the Valleys, Cornwall and Isles of Scilly, and Merseyside;
• 400 million EURO will go towards a programme aiming to support the peace process in Northern Ireland (PEACE);
• 1.166 billion EURO will make up the transitional funding which Northern Ireland, the Highlands and Islands will receive.

- Objective 2:  Regions undergoing economic and social conversion

Objective 2 (which comprises Objective 2 and Objective 5b from the 1994-1999 period) aims to support the economic and social conversion of areas with structural problems.  For the 2000-2006 period, areas with structural difficulties have been divided into four distinctive categories: industrial, rural, urban, and fisheries-dependent zones.

On 1 July 1999, the European Commission fixed a ceiling for the number of people in each Member State eligible for Objective 2 Funding.  For the UK, this ceiling was set at 13.836 million inhabitants, or 24% of the total British population.

The breakdown of Objective 2 funding was made solely on the basis of eligible population.  In other words, it was decided that every person living in an eligible area would benefit from the same level of assistance: 41.4 EURO (1999 prices) per annum.

Within this framework, the UK receives 4.695 billion EURO (1999 prices) or £2.828 billion.  This budget is divided into two elements:

• 3.989 billion EURO is for eligible Objective 2 zones;
• 706 million EURO is for transitional support (for areas which were eligible to Objective 2 and 5b funds in 1994-1999 but which are now no longer eligible).

- Objective 3:  Education, training and employment

Objective 3 aims to support the adaptation and modernisation of education, training and employment policies and systems.  It comprises the former Objectives 3 and 4 and reflects the new Title on employment in the Treaty of Amsterdam.  Objective 3 funds are not allocated to designated zones basis but rather are shared by all regions in the EU except for those regions covered by Objective 1.

For the period 2000-2006, the UK will receive under Objective 3 a total of 4.568 billion EURO (1999 prices), about £2.571 billion.  This compares to 3.680 billion EURO for the period 1994-1999.

- Fisheries

The FIFG, the financial instrument for fisheries guidance, funds complementary actions taken under the Common Fisheries Policy. In Objective 1 regions, the FIFG funds are integrated into other regional development programmes.  In areas which are situated outside Objective 1 regions, a budget of 121 million EURO, or £72.879 million, has been allocated to FIFG in the UK for the period 2000–2006.

2. Community Initiatives

Alongside these three priority objectives, European Structural Funds also finance four Community Initiatives for the period 2000-2006.

• INTERREG: cross-border, trans-national, and inter-regional co-operation aiming to promote harmonious and balanced development and spatial planning in Europe;
• URBAN: economic and social rehabilitation of towns in crisis with a view to promoting sustainable urban development;
• LEADER: rural development;
• EQUAL: transitional co-operation for the promotion of new initiatives to fight against discrimination and inequality in access to the employment market.

The total budget for these initiatives in the United Kingdom for the period 2000-2006 will be 961 million EURO (£579 million), with the following breakdown:

3. Rural Development Policy

Finally, the United Kingdom also benefits from rural development policy as funded by the EAGGF-Guarantee Section.  This support, strictly speaking, lies outside the policy framework of the Structural Funds.

Since the Berlin agreement (March 1999), rural development policy has become a major pillar of the Common Agricultural Policy.  The EAGGF-Guarantee Section now supports four measures covering the whole of the European Union (early-retirement, financial support for Less-Favoured Areas, forestry, agri-environment) and six other initiatives limited to regions not covered by objective 1 status (investment in agricultural holdings, setting-up of young farmers, training, forestry, improving processing and marketing of agricultural products, promoting the adaptation and development of rural areas).  This means that there are no designated zones for rural development.

Within the framework of the rural development policy, the annual allocation of funds to the United Kingdom is 154 million EURO (£92.7 million), which represents 3.5 % of the total package.